How to make decisions in the world market;

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How to Make Decisions in the World Market
by FRED W. O'GREEN/President, Litton Industries, Inc.
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Iintend to describe the interna-tional environment in which some of Litton Industries' operating decisions are being made Hopefully, my remarks will shed some light on why the socioeconomic and political atmosphere encountered abroad may dictate operating decisions which seem wrong or even irrational when viewed from afar by the board of an American company. 1 also would like to suggest thai the environment which business is encountering in Europe is beginning to occur in this country as well.
These circumstances are due, in part, to changing market conditions, demographic shifts, and new tech-nologies, for Litton has had to mod-ify its operations in Europe and to modernize its industrial facilities in order to grow. As I describe some of the problems that we have encoun-tered and the tough decisions that we have made, keep in mind that Litton's 100 divisions are each operated independently and that its divisions abroad are headed by foreign nationals of the countries in which the divisions are located. The 100 divisions employ approximately 75,000 people worldwide, and sales
this year are expected to reach a little over $4.2 billion.
Five European Nations
Sweden; Litton had a successful cash register business in Sweden, It was based on electromechanical technology, which became obsolete following the development of electronic technology based on microprocessors. We had two electromechanical plants in Sweden, one in Varburg on the west coast, and another in Stockholm. Both had excellent technology, a superb work force, and excellent management in electromechanical capabilities.
Sweden itself is highly socialistic, with a high tax structure that brings the accompanying social costs to approximately 60 to 70 percent, compared to about 25 to 35 percent in the U.S. These operating costs, together with the additional capital that would have been required to shift to electronics, forced us to give up a trained work force loyal to our company, to liquidate our assets, and to re-establish a capability with which we could make competitive products at a profit. Our decision was to come back to the U.S. Here is what
happened when we tried to move gradually out of Sweden.
First, when a company announces its intention to leave Sweden, it has to do so publicly. In our case, we faced further complications because we needed to provide a spare parts inventory for seven years for all the electromechanical cash registers that we had sold throughout the world. A confrontation was inevitable.
Before a company in Sweden can announce a stop-work decision, it must request permission from the Work Council, a group made up of the very workers you are planning to lay off. Once you get through this, you seek the permission of various government agencies. This should not be confused with your decision to stop work. You must first seek permission to stop. Without that permission you do not stop. It took us two years to negotiate a phase-out plan, and only then did we begin to phase down
The social responsibilities of a Swedish company to its workers are dependent, in part, on the worker's length of service. You must pay full salaries for up to three years. In our case, the government subsidized a